North Korea has conducted a test of a strategic cruise missile aimed at assessing its nuclear deterrence capabilities. In the past, such events would have triggered a market shift towards the yen and the US dollar.

Currently, the US dollar is experiencing gains due to ongoing discussions regarding tariffs. This trend indicates a more complex response in the financial markets to geopolitical developments than in previous years.

The latest missile test from Pyongyang reinforces its ongoing strategy to project strength. Historically, such actions would prompt a noticeable shift towards safe-haven currencies, particularly the yen and the dollar. However, this time, we are not seeing the same reaction. Instead, the dollar’s position appears to be driven by ongoing trade policy discussions, which have taken priority in shaping investor sentiment.

Washington’s tariff policies are now influencing currency movements more than geopolitical risks from East Asia. Traders accustomed to rapid capital flows into safer assets during periods of geopolitical tension may need to reconsider their expectations. With financial markets placing greater weight on trade and monetary policy, immediate turbulence from missile tests may not be as pronounced as before. That does not mean such events should be ignored, but their ability to shift capital flows appears to have diminished.

Meanwhile, Tokyo’s currency is not showing the strength it often would in similar situations. Market participants might view rates policy as a more pressing factor. While some would normally rush to the yen when uncertainty rises, hesitation can be seen. Recent commentary from policymakers suggests a cautious approach, and this has likely made some reluctant to position too strongly in either direction.

Looking ahead, data releases and official statements from Washington will remain pivotal for the dollar’s trajectory. The broader conversation around tariffs continues, and as long as that remains in focus, fluctuations in the dollar may be more tied to economic policy than external military developments. For those watching closely, this reinforces the need to track not just immediate headlines but also policy signals that could dictate market direction.